A secured credit card is a powerful tool to help you establish or rebuild your credit. This type of card works just like a traditional credit card except it requires a deposit that’s usually equal to your new credit line. For example, you may open a secured credit card with $750 and receive a $750 credit limit. Qualifying for a secured card is easy but not all secured cards are equal. Here are the best secured credit cards for bad credit based on total cost and other features.
Why Do You Need the Best Secured Credit Cards for Bad Credit?
A secured credit card can help you establish and build your credit history when you can’t qualify for a traditional credit card. This type of credit card is designed for people with no or bad credit, including people who are recovering from a bankruptcy. A secured card will report to all 3 credit bureaus to help you demonstrate on-time payment history that can boost your score and help you qualify for new loan products.
What Are the Best Secured Credit Cards for Bad Credit?
When choosing a secured credit card, there are a few things to look for. One of the most important is the annual fee. Choose a card with no or a low annual fee because there are many options that won’t cost a fortune to build your credit. You should also check for other fees associated with the card. Choose a credit card without monthly maintenance fees or hidden costs.
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If you plan to travel outside the U.S., a card with no foreign transaction fee is a good choice. You may also want to check the balance transfer fee if you will transfer a balance to your new card. Finally, consider whether there is a rewards program. This isn’t common with secured cards but some — such as the Discover it Secured card — do earn cash back.
5. Navy Federal nRewards Secured Card
If you are a military member with bad credit, the Navy Federal nRewards Secured card may be a good choice. This is one of the few secured cards available that earns rewards and it would be higher on the list except it’s not widely available with strict qualifications.
How to Qualify:
- Must be a Navy Federal Credit Union member. You can join the credit union if you are a veteran or active duty member of the Armed Forces, a DoD civilian, or a family member of any of these.
- Requires a minimum deposit of $500.
Benefits:
- Earns 1 point per $1 spent. Points can be redeemed starting at 1,000 points for gift cards, statement credits, and cash back.
- No annual fee.
- No balance transfer fee or foreign transaction fee.
Drawbacks:
This card is only available to active and retired military members and family members which means its availability is limited. While it comes with decent rewards, the card requires a minimum deposit of at least $500 — higher than most secured cards.
How to Use It:
This card comes with unique perks for a secured card. Here are some of the best ways to make the best use of the nRewards Secured card:
- Use it while traveling. With no foreign transaction fees, this is a good card to have if you travel outside the United States.
- Transfer a balance. If you are trying to improve your credit and pay down debt, this card does not have a balance transfer fee and an APR of 9.99% to 18%. You may save hundreds by transferring your balance to the secured card and paying it down with a lower interest rate.
4. USAA Secured American Express
If you qualify to become a USAA member, USAA Secured American Express is one of the better-secured cards available. It doesn’t earn rewards and there is an annual fee, but your security deposit will earn interest and the APR is competitive.
How to Qualify:
- Must be a USAA member. USAA membership is open to active and veteran military members and families.
- Requires a deposit of at least $250.
Benefits:
- Earn interest on your deposit. Your security deposit will be put into a 2-year CD which pays a variable interest rate.
- You can increase your credit limit whenever you want by making another deposit into your CD.
Drawbacks:
The primary downside of the USAA Secured card is it has an annual fee of $35. This isn’t the highest out there but you can get a secured card with no annual fee.
How to Use It:
Because this card puts your deposit into a CD with a competitive interest rate, the best way to use it is to build an emergency fund. While using the card regularly for small purchases to build your credit, occasionally make additional deposits to increase your credit limit and your CD savings.
3. Open Sky Secured Card
If you are concerned about a credit check or you don’t have a checking account, it can be hard to qualify for even a secured credit card. The Open Sky Secured card makes it easy to get approved even if you have a recent bankruptcy, delinquencies, or no bank account.
How to Qualify:
- No checking account required. Your deposit can be paid by debit card, wire transfer, Western Union, money order, or check.
- No credit check. You can qualify with any credit score, a recent bankruptcy, no credit, or recent delinquencies.
Benefits:
- Multiple ways to pay the deposit.
- Credit limit of $200 to $3,000 equal to your deposit.
Drawbacks:
The biggest drawback to the Open Sky Secured card is it can never be converted to an unsecured credit card. Other secured cards return your deposit after 8 to 12 months of on-time payments and convert your account to a regular credit card. With the Open Sky card, you will need to close your account to get your deposit back at which point you should qualify for a regular credit card.
The card also comes with a $35 annual fee. If you qualify, a secured card with no annual fee is a better choice.
How to Use It:
If you don’t have a bank account or you have a credit problem that would make it difficult to get another secured card, such as a recent bankruptcy, the Open Sky Secured card is a good choice. Use your card regularly and pay the monthly bill on time. After 1 year, review your credit score and, if it’s improved enough, you can close your account and apply for a traditional credit card.
2. Capital One Secured
This card is one of the best secured credit cards for bad credit if you don’t have a lot of money saved up to use as a deposit. Unlike most secured cards, you can qualify for a partially secured credit limit.
How to Qualify:
- Minimum deposit of $49, $99, or $200 paid within 80 days of being approved.
- Must have a bank account.
Benefits:
- No annual fee.
- Initial credit limit of $200 with a deposit of $200, $99, or $49, depending on your credit score.
- Ability to pay deposit in installments.
- Credit limit automatically increased after 5 on-time payments.
Drawbacks:
The only drawback with the Capital One Secured card is it doesn’t come with rewards. This shouldn’t be a deal-breaker as the best secured credit cards for bad credit are designed to help you improve your credit; earning cash back shouldn’t be your primary concern.
How to Use It:
Use your Capital One card responsibly for regular purchases and pay your bill in full each month. You will receive an automatic credit limit increase after just 5 months. This card is best for people who can’t afford a full deposit or want to pay their deposit in installments over time.
1. Discover it Secured
While this card has stricter requirements than most secured cards, it’s one of the best secured credit cards for bad credit because it comes with a great rewards program, although it’s not the same as the regular top-rated Discover it card.
How to Qualify:
- Deposit of at least $200.
- Must have a bank account.
- No recent bankruptcy.
Benefits:
- No annual fee.
- Earn rewards. Get 2% cash back on up to $1,000 per quarter on gas and restaurants and 1% back on all other spending. This is a decent rewards rate for a regular card but nearly unheard of with a secured card.
- Sign-up bonus. At the end of the first year, all of the cash back you earn will be automatically doubled. There is no limit to this bonus.
- Automatic evaluation to upgrade to an unsecured card after 8 months.
- Free FICO score access every month.
- No foreign transaction fee.
Drawbacks:
There are a few drawbacks to the Discover it Secured card. While it has no foreign transaction fee, it isn’t the best choice for using outside the U.S. because Discover is not widely accepted. Unlike the Capital One Secured card, the security deposit will be equal to the credit limit and it can’t be paid in installments.
How to Use It:
The Discover it Secured card is a great choice for earning rewards while you improve your credit score. For the best impact, use the card regularly but always pay the balance in full. Remember: paying interest will quickly eat up any rewards you earn. Once you make on-time payments for 8 months, you can qualify to have your account converted to an unsecured card without hurting your credit by applying for a new card.
Bottom Line
The Discover it Secured card earns the top spot among the best secured credit cards for bad credit with a truly great rewards program for a secured card, no annual fee, and other perks like access to your FICO score to monitor your improvement. Do you have any suggestions for the best secured credit cards for bad credit that should be on this list? Let us know your thoughts!
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